AT&T Agrees to Pay as Much as $600 Million for NextWave

AT&T Inc. (T), the largest U.S. telephone
company, agreed to buy NextWave Wireless Inc. in a deal worth as
much as $600 million in cash, giving it more airwaves to provide
mobile Internet services.

Under the agreement, AT&T will pay about $25 million to
shareholders of San Diego-based NextWave, plus a contingent
payment of an additional $25 million, according to a statement
today. In a separate deal with the once-bankrupt company’s
lenders, AT&T will acquire NextWave’s debt, bringing the deal’s
total value to $600 million.

Mobile-phone carriers are racing to add more airwaves as
they roll out new services and congestion grows on current
networks. NextWave holds licenses for Wireless Communication
Services, or WCS, which would start being used for mobile
Internet access for the first time under a plan by AT&T and
Sirius (SIRI) XM Radio Inc. The Federal Communications Commission is
weighing the proposal, submitted in June.

“WCS spectrum was first auctioned in 1997, but has not
been utilized for mobile Internet usage due to technical rules
designed to avoid possible interference to satellite radio users
in adjacent spectrum bands,” Dallas-based AT&T said today in
the statement. The Sirius proposal “effectively creates much-
needed new spectrum capacity.”

AT&T expects to complete the NextWave transaction by the
end of the year, assuming it passes regulatory hurdles. If its
Sirius proposal is approved, the company plans to start using
WCS spectrum for fourth-generation wireless service in about
three years. That could help support surging traffic on
smartphones and tablets, AT&T said.

AT&T fell less than 1 percent to $37.54 at the close in New
York. The shares have climbed 24 percent this year.